CLA-2 CO:R:C:V 544230 EK
Ronald W. Gerdes, Esquire
Sandler & Travis, P.A.
1120 Nineteenth Street, N.W.
Washington, D.C. 20036
RE: Prospective Ruling Request
Dear Mr. Gerdes:
This is in response to your letters of August 11, 1988, and
November 4, 1988, requesting a ruling as to the proper valuation
of merchandise imported by your client (hereinafter referred to
as importer).
FACTS:
You state that the importer currently imports brassieres
assembled from American components in El Salvador by a related
company. The merchandise is entered under item 807.00, Tariff
Schedules of the United States, and is appraised pursuant to
transaction value, section 402(b) of the Tariff Act of 1930,
as amended by the Trade Agreements Act of 1979 (TAA;
19 U.S.C. 1401a(b)).
In the near future, you indicate that the importer will
file a Transportation and Exportation Entry for the merchandise
upon its arrival in New Orleans. The goods will then be shipped
through McAllen, Texas, to a related party in Mexico. There the
merchandise will be packaged for retail sale. You have submitted
samples of the type of packing which will occur in Mexico.
You state that the merchandise is assembled specifically
for the United States market and that the importer only sells the
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merchandise in the United States. All parties intend the
merchandise to be shipped to the United States and diversion of
the merchandise is not even a reasonable possibility.
The cost of the packing will be paid separately to the
Mexican related party and not the seller of the merchandise. The
amount reflects approximately 2 - 5% of the current transaction
value.
ISSUE:
Whether the sale for exportation to the United States for
purposes of determining transaction value is between the importer
and the El Salvadoran related party assembler and whether the
cost of the packing is added to the price actually paid or
payable.
LAW AND ANALYSIS:
The preferred method of appraisement, transaction value, is
defined as the "price actually paid or payable" for merchandise
when sold for exportation to the United States, plus certain
additions including packing costs incurred by the buyer.
For purposes of this response, we are assuming that
transaction value is applicable in appraising the merchandise and
that the relationship between the parties does not influence the
price actually paid or payable. The concerned appraising officer
has the responsibility of making the determination as to whether
the price has been influenced by the relationship.
With respect to the instant situation, the sale for
exportation to the United States for purposes of determining
transaction value occurs between the El Salvadoran related party
seller and the importer. The packing operation in Mexico does
not alter that conclusion. The "sale" for exportation to the
United States occurs at the time the merchandise is sold from El
Salvador.
Please note that in Headquarters Ruling No. 555088 dated
October 17, 1988, this office ruled that the entry and
exportation of the assembled merchandise pursuant to a
transportation and exportation bond does not preclude the
application of item 807.00, TSUS, to the merchandise upon a
subsequent importation.
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Section 402(b)(1)(A) of the TAA requires that an addition
to the price actually paid or payable be made for "the packing
costs incurred by the buyer with respect to the imported
merchandise. Section 402(h)(3) of the TAA defines packing costs
as "the cost of all containers and coverings of whatever nature
and of packing, whether for labor or materials, used in placing
merchandise in condition, packed ready for shipment to the United
States."
Under the facts presented, the retail packing operation in
Mexico in included in the statutory definition of packing costs
and must be added to the price actually paid or payable. The
imported merchandise in this case is not packed ready for
shipment to the United States until the merchandise has been
packed in Mexico.
HOLDING:
In view of the foregoing, it is our conclusion that
transaction value pursuant to section 402(b) of the TAA is
represented by the "price actually paid or payable" by the
importer to the El Salvadoran seller. The packing costs incurred
by the importer and paid to the Mexican related party are to be
added to the "price actually paid or payable."
Sincerely,
John Durant, Director,
Commercial Rulings Division